Eden District Council Cabinet Members are being asked to approve a revised budget for the carbon zero retrofit of the new Voreda House single site headquarters in Penrith.
Record-breaking inflationary increases in building costs nationally have been caused by the continuing after-effects of the global COVID-19 pandemic and the ongoing war in Ukraine. The discovery of hidden structural damage to the internal framework of Voreda House; uncovering of asbestos at two locations within the building; and the need to apply a protective coating to concrete floors and supports after testing revealed high levels of carbonation, have also caused costs to increase significantly.
The estimated cost of inflation increases for labour and materials is estimated to be £800,000. When combined with the adjustments for remedial work and extended programme costs of £677,000, this has resulted in an increase to the overall contract sum of £1.47m. It is not anticipated that these costs will require further revision. The combined impact of these unforeseen delays to the project means that work is now unlikely to be completed until the end of March 2023, although the contractor will endeavour to accelerate the programme where possible.
It should be noted that the initial revenue savings projections on utilities costs for Voreda House over a 25-year period were estimated to be £1.02m and the all-inclusive cost savings were estimated to be £6.18m. Given the recent significant increase in utility costs, these estimates have now been recalculated and the all-inclusive cost savings are now estimated to be £10.7m. This means that the Voreda House project will deliver even more significant savings in the long term.
Prior to contract signature with the project contractors, Collinson Construction, all necessary due diligence was undertaken culminating in a Pre Contract Service Agreement (PCSA) contract being signed in December 2021. At this point the turbulence in the construction market, due to global economic conditions, was emerging and the contract arrangements were designed to mitigate escalating materials and labour inflation as far as possible. However, further escalation and extension of the programme has had a substantial impact on the costs of construction.
It is clear that the pre-purchase and construction surveys could not have identified the issues that have caused these delays and the resultant increases in costs prior to construction beginning. Nor could the inflationary impact on all construction costs caused by the War in Ukraine have been predicted. However, given the current phase of construction, the Council is reassured that the likelihood of any further issues being found is minimal.
Eden District Council Leader, Cllr Virginia Taylor, said: “The Voreda House project is the realisation of the Council’s long held ambition to move to a single site to enable the organisation to function more efficiently, effectively and healthily – offering a modern, accessible service ‘hub’ for citizens to use.
“I remained adamant, when the configuration of local government reorganisation in Cumbria was announced, that Eden needed to retain such a service hub in our largest town. Without a fit for purpose building, it was a danger that both jobs and services would have been located elsewhere.
“The Westmorland and Furness Shadow Authority Cabinet has indeed agreed to use named ‘anchor’ buildings in key service locations – and one of these is Voreda House. This demonstrates the strength of the business case for the project, and we’re delighted that Eden District Council’s objectives of securing public sector jobs and a public service and community hub in Penrith will indeed be progressed by the new Council.
“Voreda House will deliver high quality Member and staff office and meeting spaces, together with additional office capacity for public sector partners. The outstanding PassivHaus credentials of the project will also deliver considerable savings whilst significantly reducing the council’s carbon footprint.”
The capital cost increase for the project is less than £2m, which falls below the threshold requiring any budget increase to be reported the Westmorland and Furness Council Cabinet, as per the provisions of Section 24 of the Local Government and Public Involvement in Health Act 2007.